Jerson Lao Belen

December 7, 2007 BIR RULING [DA-625-07] Sec. 32 (B) (6) (a) DA-527-2004 Jerson Lao Belen Attorney & Counsellor-at-Law c/o Atty. Epifanio E. Gamo, Jr. Law Office A. Flores St., San Pablo City, Laguna S i r : This refers to your letter dated February 10, 2005 requesting on behalf of your client, Mr. Rosalio N. Amante, for exemption from the payment of income tax and consequently from withholding tax on the retirement benefits paid to him under the PAGCOR Employees' Retirement Plan, a reasonable retirement Plan under Sec. 32 (B) (6) (a) of the Tax Code of 1997, as amended. It is represented that on February 27, 2002, the Board of Directors of PAGCOR approved the modified PAGCOR retirement/separation benefit plan which provides that personnel who are at least 55 years old with at least 15 years of service in the company shall be entitled to his basic pay multiplied by the factor as applicable based on his years of service and lump sum retirement benefit; that Mr. Rosalio N. Amante, is a former Assistant Gaming Manager of CF Pavilion Philippine Amusement and Gaming Corporation (PAGCOR); that he retired last January 15, 2004 at the age of 56 after rendering more than fifteen (15) years of service; and that his retirement benefit amounted to P1,004,803.75 was subjected to withholding tax in the amount of P278,258.08 which was remitted to the BIR as certified by Ester H. Reyes, Senior Managing Head, Accounting Department of PAGCOR. DaTICc In reply, please be informed that Section 32 (B) (6) (a) of the Tax Code of 1997 as amended. provides, viz: "(a) Retirement benefits received under R.A. 7641 and those received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan maintained by the employer: Provided, that the retiring official or employee has been in the service of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the time of his retirement: . . ., shall not be included in gross income and shall be exempt from taxation." It is undisputed that the above-cited provision provides merely for the minimum requirements of 50 years of age and 10 years of service. However, the Retirement Plan can provide for more than 50 years old and 10 years of service. Inasmuch as PAGCOR Employees' Retirement Plan provides for 55 years old and at least 15 years of service, these two (2) conditions must be complied with by the official or employee of PAGCOR in order to be exempt from income tax and consequently from withholding tax. Considering that Mr. Rosalio N. Amante is 56 years old at the time of his retirement and has rendered at least 15 years of service to the company, the retirement gratuity pay he received pursuant to the aforestated retirement benefit plan is exempt from income tax and consequently, from the withholding tax prescribed in Section 79, Chapter XIII, Title II of the Tax Code of 1997, as amended. (BIR Ruling No. DA-527-2004 dated October 11, 2004). DAETcC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service